When it comes to creating a commercially viable product, great ideas can only go so far. For any chance at success in the marketplace, businesses need to invest in both a sound product and an optimized production process. Contract manufacturers can help with the latter.
Each day, contract manufacturers help businesses around the world bring new products to market. By offering the technical expertise gained through years of experience in the field, contract manufacturers are able to help businesses with product design, component manufacturing and more while businesses focus on their core offerings and overall business plan.
In spite of their utility, contract manufacturers have a hard time communicating their selling points to vendors and suppliers searching for their services. In fact, many of the features vendors search for in a contract manufacturer are unquantifiable “soft” traits manufacturers can’t communicate through a track record or history of success, like transparency, reputation and responsiveness.
Marketing intelligence expert Kate Hammeke highlights this obstacle in a recent article for Life Science Leader:
“One of the main obstacles in developing strategic relationships with suppliers is a lack of measurable traits that strategic partnerships would embody… Within an organization, there is seldom a set of benchmark attributes for selecting a contract manufacturer. Thus, for many projects, CMO selection is undertaken tactically, despite a strong desire for a more strategic approach to both the selection process and the relationship that will come from it.”
As a contract manufacturer ready to work with new businesses, how can you show off your intangible yet winning qualities in a way that will help you gain more contracts? In this article I’ll give an overview of what vendors need from contract manufacturers, cover the primary factors behind vendors’ purchasing decisions and how contract manufacturers can use their websites and other points of contact to represent their manufacturing organizations in their true light.
Why Vendors Seek Contract Manufacturers
Contract manufacturing organizations (CMO’s) bring all the knowledge and technical know-how necessary to make a product succeed in the market. In “Putting All the Pieces Together: How to Gain Greater Efficiency with Contract Manufacturing,” business process outsourcing firm BancTec highlights the following advantages and services offered by CMO’s, including:
- Product design assistance
- Concept to drawing assistance to spark the production process
- Access to deep engineering knowledge in a variety of fields, including electrical, mechanical and software engineering with potential for hybrid product manufacturing
- Component manufacturing
- Product assembly and testing
- Cost savings through volume purchasing
- Manufacturing space and human resource savings
- Improved logistics and volume purchasing
- Flexible production
When it comes to solving production problems, contract manufacturers are often better and more efficient problem solvers than vendors themselves. CMO’s also bring the flexibility to ramp up or ramp down production to match market demand.
What Businesses Look for in Contract Manufacturers
Outside of the variety of services vendors look to contract manufacturers to provide, there are a number of distinguishing characteristics that draw vendors to contract and partner with them. Though many of these characteristics are intangible and unquantifiable, they generally hold the greatest sway in vendors’ ultimate buying decisions.
Passion and Partnership
Until it reaches the market, a product exists only as a business’s prized brainchild. A CMO with a collaborative attitude can lead that brainchild to its greatest potential success.
Businesses are looking for contract manufacturers as passionate about their brainchild as they are. This sentiment is reinforced by Guy McIlroy, inventor of Apple’s Airport WiFi product and principal engineer of project management and engineer services firm Koliada, LLC:
“New product ventures will be made or broken by their CMO, because quality, fit and finish and delivery times are vital for new brands to win new customers. When sufficiently inspired, CMO’s have been known to carry inventory cost all the way to the customer, a boon for newer ventures who should be worrying most about selling more units.”
Finding a CMO with whom they can foresee a relationship built on trust and a passion for the product is a top priority for businesses manufacturing a new product. “To build something nobody else has built needs both parties to exhibit patience, perseverance and tolerance,” McIlroy added. “All of these qualities are exponentially reinforced by good partnerships.”
When I asked businesses what they look for in contract manufacturers, close proximity was one of their top responses. In making a contracting decision, Erica Harriss, founder of Saving Grace Beauty, asks, “Are they near our headquarters so that we can easily stop and
have face to face meetings?” Close proximity eliminates the need for her to spend money on travel, a hindrance when working in small batches.
Besides minimizing travel costs, geographic proximity also makes manufacturing outcomes and associated costs more predictable, crucial to a business trying to prove a new product. McIlroy emphasizes that the closest contract manufacturer might not be the cheapest one, but the extra cost is worth it:
“Unless the client is very experienced, I recommend that any new product bring-up be done locally to early production. Once the kinks have been worked though and you have an, albeit modest, revenue stream, then you can worry about volume and volume pricing.”
Flexible Payment Options
When it comes to payment options, flexibility can make or break a contract with a small business. Especially when it comes to upfront cost, the option for flexible payments, not overall price, is a major contributing factor in buying decisions. Being flexible upfront can also go a long way toward developing a partnership relationship to last over time.
“By being flexible, they are showing they believe in our company/product,” notes Harriss. “As you grow, you remember the people who helped get you where you are with that growth. Later on, instead of jumping ship to a larger group, I’d be more likely to try and keep the relationship so that we both win and continue to have success.”
It’s common for small business owners to seek out what Harriss calls a “small family feel” in potential contract manufacturing partners. These CMO’s succeed in emanating an attentive aura and make it known that they won’t drop the ball, even for small jobs.
Industry experience is a fifth trait that leads vendors to buying decisions. As a business owner, are you more likely to choose a contract manufacturer with a track record of producing products similar to yours, or are you going to take a chance on a manufacturer specialized in a completely different industry? Businesses are looking for manufacturers that can provide added insight into their go-to-market strategy.
“We are in the cosmetic industry. Therefore, FDA procedures are important to us,” Harriss said. “Should the manufacturer stay on top of these regulations, that’s a bonus of us needing to be the only one making sure we aren’t missing a requirement.”
Appealing to Vendor Needs
It’s one thing to know what vendors are looking for in a contract manufacturer, but it’s another to address those needs successfully. Though vendors are looking for a lot of the same things in CMO’s, they don’t always think of those traits in the same way. According to Hammeke, CMO’s will therefore need to communicate their soft traits and selling points in a personalized way for each prospect. Just take her example of the way vendors interpret transparency:
“Good communication/transparency means something different to different audiences, even when they are within the same type of organization. To some, it means daily correspondence even when there is no news; to others, good communication/transparency means clear and concise correspondence (with a plan already established and ready to implement) when there is an unforeseen challenge or setback. Which means, as a CMO, it is key to be a good listener and to ask the relevant questions in order to understand not only which attributes carry the most weight in CMO selection, but also to understand how the company you’re in conversation with defines those traits. Then, adopt that definition as your own when pitching business to each specific prospect — that is, if you’re confident the style of communication can be maintained throughout the relationship when the business is won.”
Luckily there are existing ways contract manufacturers can successfully express their selling points. Here are a few winning methods.
According to The Alternative Board’s recent B2B sales survey, 93 percent of businesses agree that reviews and analysis drive major purchasing decisions. If you have a history of happy clients, let your customers speak for themselves. Encourage clients to leave reviews on LinkedIn and other industry networks. These types of third party proof can go a very long way toward helping you gain more contracts.
Harriss of Saving Grace Beauty, for example, has turned to her network for more in-depth and unbiased information about contract manufacturers she was considering. “Once, when I found a company I wanted to know more about, I got on LinkedIn and searched for people who worked there to see if we had any connections in common so that I could ask a connection about this particular company,” she said. “Surprisingly, this worked for me, and I was able to get some more information from this connection on if that might be a fit.”
You might also want to consider creating incentives for your existing clients to refer new ones. “Third party validation is imperative when it comes to convincing business owners to sign on the dotted line,” says David Scarola, vice president of The Alternative Board. “It removes the guesswork and some of the potential risk associated with making a large purchase. A recommendation from a trusted peer adds familiarity to the unknown.”
Think “Friendly” Pricing
Be upfront and honest on your pricing page, but don’t get too technical. “Leave the fine print (fees for XX, fees for changes, etc) for the contract,” Harriss says. “It can be intimidating to a small company initiating a relationship with a new company.”
If you’re spelling out change fees and the like on your website, chances are your fee structure is too complicated anyway, and you’re unable to offer the flexibility small vendors are searching for.
A more self-reliant way to prove your commitment to prospective clients is to offer appraisal or trial services. “Business owners need something tangible they can believe in before making a purchase,” notes Scarola. “By interacting with the product or service in advance, they can form their own opinions based on what they experience.”
Show Your Personality
Finally, make your organization stand out from the rest. What materials do you specialize in? What range of product applications have you assisted in? What is your attitude toward partnering with vendors? About pages on your company site, fun company videos and photo streams are great and worth-while options for helping prospects understand your business culture and offerings. Most of all, these efforts go a long way toward helping prospects understand what it’s truly like to partner with your organization.
“Try somewhere on your website (likely my first introduction to your company) to have a little personality,” says Harriss. “Make your company seem likable and approachable!”
Featured image via Flickr